2019 (9) TMI 601 - AT - Income Tax

Tribunal upholds assessment reopening under Income Tax Act based on Investigation Wing findings. Disallows deduction under section 54.

Late Om Parkash Gupta, [Through LRs Raj Mohini Gupta & Ors] Versus Income Tax Officer, Ward-1 (2), Jammu

Late Om Parkash Gupta, [Through LRs Raj Mohini Gupta & Ors] Versus Income Tax Officer, Ward-1 (2), Jammu - TMI Issues Involved:1. Legality of reopening of assessment under sections 147/148 of the Income Tax Act, 1961.2. Entitlement of the assessee to claim deduction under section 54 of the Income Tax Act, 1961.Detailed Analysis:1. Legality of Reopening of Assessment:The assessee contested the reopening of the assessment under sections 147/148, claiming it was based on 'borrowed satisfaction' without independent application of mind by the Assessing Officer (AO). The reasons for reopening included information from the Investigation Wing regarding undisclosed capital gains from the sale of property. The assessee argued this was not permissible under law, citing various judicial precedents.The Departmental Representative (DR) opposed the admission of additional grounds, suggesting they were an afterthought and unsupported by law. The DR cited several decisions to support this stance, emphasizing that the sufficiency of reasons or correctness of information could not be questioned at the stage of reopening.The Tribunal admitted the additional grounds, referencing NTPC Ltd. v. CIT, which allows raising legal pleas based on primary facts on record. On merits, the Tribunal found no fault with the reopening. The information from the Investigation Wing was based on material seized during search proceedings, carrying a statutory presumption of truth under section 292C. The AO's belief of income escapement was held to be honest and bona fide, satisfying the conditions for issuing a notice under section 148. The Tribunal upheld the reopening of the assessment, noting the assessee did not object to the reasons recorded until the assessment date.2. Entitlement to Deduction under Section 54:The assessee claimed a deduction under section 54 for the purchase of a residential house, supported by an Agreement to Sell (ATS) dated 25.12.2001. The AO disallowed the claim, citing discrepancies and lack of evidence. The AO's investigation revealed that the alleged seller, Smt. Amriti Devi (AD), denied owning or selling the property, claiming she was a tenant and not a state subject, thus unable to own property in Jammu & Kashmir. The AO also found the ATS to be unregistered and the witnesses untraceable.The CIT(A) upheld the AO's findings, noting the property was transferred to the assessee by the Jammu Development Authority (JDA) only on 03.01.2004, beyond the period specified under section 54. The CIT(A) also questioned the legal validity of the ATS, given AD's lack of state subject status and the requirement for JDA's approval for property transfer.The Tribunal reviewed the evidence and upheld the disallowance. It found the assessee's claim unsubstantiated, with the ATS dated 25.12.2001 being a forged document. The Tribunal noted the assessee's failure to produce any document of title or evidence of the property's purchase or construction. The Tribunal also dismissed the assessee's plea for cross-examination of AD, as the onus to prove the ATS's validity was on the assessee, who failed to meet this burden.The Tribunal concluded that the assessee did not satisfy the conditions for claiming deduction under section 54. The claim was found to be unproved, if not disproved, and the disallowance was upheld.Conclusion:The Tribunal dismissed the assessee's appeal, upholding both the legality of the assessment reopening and the disallowance of the deduction under section 54. The order was pronounced in the open court on March 20, 2019.